Wed October 3, 2012

Homeowners Facing Foreclosure Get New Protections

Troubled homeowners trying to modify their loans often complain about being dual-tracked. That's when banks work on a loan modification, but at the same time, continue with the process of foreclosing. As of today, five of the country's major lenders are no longer supposed to put borrowers on a dual track. Those are the terms of a national settlement agreed to by those lenders earlier this year after it was revealed that the banks were robo-signing - mass producing foreclosure documents without checking their accuracy. NPR's Yuki Noguchi has more.

YUKI NOGUCHI, BYLINE: Patricia Allen has been stuck in a classic case of dual-tracking. It all started when the Lakewood, California resident applied to modify her loan before her adjustable interest rate increased. She eventually fell behind on payments, and now her home is scheduled for sale on the 25th of this month. But, then again, she isn't really sure what's going on.

PATRICIA ALLEN: I don't know, because the clock is ticking, but I haven't received anything in the mail.

NOGUCHI: But you're also being considered for a mortgage modification.

ALLEN: I am, as far as I know.

NOGUCHI: Katherine Porter is a law professor at the University of California at Irvine. She was appointed independent monitor to see the banks' compliance with the settlement in that state. In a report released this week, Porter said a sixth of some 1,400 complaints she's received to date concern dual-tracking.

KATHERINE PORTER: I think it's likely that the report understates the amount of dual-tracking that's actually going on. Many homeowners don't use the term dual-tracking. Once we explore that situation further, it often turns out that there's a pending loan modification process that's running alongside a foreclosure process.

NOGUCHI: Porter says the process bars banks from proceeding with foreclosure on borrowers who have applied to be considered for a loan modification. Varying levels of protections exist for homeowners up to within 15 days of a foreclosure sale date.

PORTER: One of the real harms that we've heard over and over again from homeowners is the anxiety, the fear and the uncertainty. The problem with dual-tracking is that it doesn't let them know what the timing of that process is going to be. Their loan modification is with the bank. They don't know how long it's going to take to get an answer. At the same time, the foreclosure machinery is moving forward.

NOGUCHI: Robert Chabot has been and remains in that limbo.

ROBERT CHABOT: The dual-tracking is still happening.

NOGUCHI: Chabot fell behind on payments after his salesman income dropped and hospital bills set him back. As of now, he says his Lakeside, California house is up for a foreclosure sale scheduled for later this month. That technically shouldn't be allowed, he argues, because meanwhile, his bank is also still requesting he resend documents relating to his pending modification application.

CHABOT: I'm losing years of my life just trying to meet the lending institutions' requests, at the same time knowing that if one slip-up occurs, they will sell the house. It'll immediately go away, and all this will be for naught.

NOGUCHI: Chabot says he's doing his own version of dual-tracking on the bank. While he fights to keep his house, he's also preparing evidence to make a case for why his bank may be in violation of its settlement agreement. Meanwhile, a new state law is set to go into effect next year, which will outlaw dual-tracking on all homeowners in California, not just those covered by the settlement. Yuki Noguchi, NPR News. Transcript provided by NPR, Copyright NPR.